2021 (7) TMI 857 - AT - Insolvency and Bankruptcy

Interest on delayed payment of sale consideration - delay on the part of the Respondent to pay balance sale consideration or not - refund of excess interest paid, due to the delay, for which respondent id responsible - can the burden of interest be fastened on the Respondent / Successful Bidder - process of sub-division of the land was restricted to the leasehold land and not to the other freehold land - HELD THAT - The delay in payment of balance sale consideration in respect of leasehold land cannot be attributed to the Respondent. However, the Respondent is responsible in respect of delay in payment of balance sale consideration in respect of freehold land. Accordingly, the Appellant is directed to refund the excess interest deducted by him to the Respondent to the extent of leasehold land. The impugned order is set aside - appeal disposed off.

Summary

Issues Involved:
1. Delay in payment of balance sale consideration.
2. Attribution of delay to the Respondent.
3. Interest on delayed payment.
4. Subdivision of leasehold land.
5. Refund of interest amount.

Detailed Analysis:

1. Delay in Payment of Balance Sale Consideration:
The appeal was filed under Section 61 of the Insolvency and Bankruptcy Code, 2016, against an order by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench. The core issue was whether the delay in payment of balance sale consideration by the Respondent was solely attributable to them, and if so, whether they should pay interest for the delayed period.

2. Attribution of Delay to the Respondent:
The Adjudicating Authority noted that there was a delay in payment by the Respondent but concluded that it could not be solely attributed to them. The Appellant, the Liquidator of the Corporate Debtor, contended that the delay was due to the Respondent's failure to pay the sale consideration even for the freehold part of the land, asserting that the subdivision of the land was an administrative process and not linked to the payment.

3. Interest on Delayed Payment:
The E-auction Sale Process Memorandum, particularly Clause 11, specified that the Successful Bidder must deposit the balance sale consideration within 90 days, with payments after 30 days attracting interest at 12% p.a. The Liquidator demanded interest based on this clause, arguing that the Respondent failed to release the payment within the stipulated period, thus attracting the interest penalty.

4. Subdivision of Leasehold Land:
The Respondent argued that the Liquidator was responsible for the subdivision of the leasehold land from GIDC and that the balance payment should only be payable upon successful subdivision. The Liquidator had clarified that interest on delayed payment would be waived to the extent the delay was due to the subdivision process. The Respondent claimed the delay was due to the Liquidator's failure to promptly handle the subdivision, which was complicated by GIDC's conditions and the COVID-19 lockdown.

5. Refund of Interest Amount:
The Adjudicating Authority directed the Liquidator to refund the full amount of interest to the Respondent, as the delay could not be attributed solely to them. However, the Appellate Tribunal observed that the delay in payment of balance sale consideration for the freehold land was the Respondent's responsibility. Therefore, the Liquidator was directed to refund the excess interest deducted, specifically related to the leasehold land.

Conclusion:
The Appellate Tribunal held that the delay in payment concerning the leasehold land could not be attributed to the Respondent, but the delay regarding the freehold land was their responsibility. Consequently, the Liquidator was instructed to refund the excess interest deducted for the leasehold land. The impugned order dated 12.02.2021 by the Adjudicating Authority was set aside with these observations and directions. Pending IAs were disposed of, and interim orders vacated, with no orders as to costs.